No Free Stuff Here: At Angie's List, Members Pay

By

Teri Evans

Updated Oct. 6, 2010 9:54 a.m. ET

After graduating with an economics degree in 1995, 22-year-old Angie Hicks thought she'd work for a small business, preferring a close-knit environment that meshed with her small-town roots. When venture capitalist Bill Oesterle, a former boss from a college internship, suggested they partner on a start-up, she never imagined they'd be laying the foundation of a national company. Together, they co-founded Angie's List, a review service of home-improvement companies designed to take the angst out of hiring contractors. Today, Angie's list has grown to more than one million members in some 200 cities and serves up reviews in 500 categories, primarily home and healthcare services. In the last two years alone, the 400-employee Indianapolis company raised $81.5 million from investors; it expects revenue—from membership fees and select advertising from highly rated service providers—to reach $60 million this year. Mr. Oesterle, who early on played an advisory and fundraising role, continues to serve as chief executive. Ms. Hicks, who ran day-to-day operations, now serves as chief marketing officer.

Edited interview excerpts with Ms. Hicks, now 37, follow.

ENLARGE

Angie Hicks
Cobalt Photography Studio

Q. You met Mr. Oesterle while a student at Depauw University in Greencastle, Ind. How did you come up with the idea for Angie's List?

A. After my internship, Bill and his family moved to Columbus, Ohio, and they were trying to renovate a 1920s home but having trouble finding contractors. So we started talking about the difficulty consumers have in finding reliable service companies. There should be a better way to share the information instead of just asking your friends and colleagues. So, I moved to Columbus and we started Angie's List as a call-in service for reviews about home improvement and lawn care.

Q. How did the service work?

A. Every new member I signed up, I got a list and a review of every service company they had used. When a call came in [from a paid member looking for a review], I would share the companies on the list with the higher reviews and read those over the phone. About 90% of the traffic now is on the Internet, but you can still call and talk to a live person today. And we survey consumers in new markets before opening there.

Q. You did this all yourself?

A. I worked by myself the first year and signed up a thousand members in Columbus that year. In the beginning, I went door-to-door selling the membership.

Q. You literally knocked on people's doors?

A. Yes. I was a pretty reserved, quiet person, so that was one of the hardest things I've ever done. I remember one of the first houses I went to, her name was Patty. She was so excited that she bought two memberships, one for herself and one for her son. Then she asked me: How many memberships do you have now? I said, 'Well, that makes three!' (Laughs.) She then hurried to get a list of contractors she had used and friends she insisted I call. To this day I thank Patty for taking a leap of faith.

More How I Built It

Q. Angie's List started before the Internet boom and now consumers have access to all kinds of free reviews. How have you faced that competitive challenge?

A. We always re-think our decision to [charge for access to reviews], something that's virtually unheard of today, but we've found consumers are willing to pay for good information. In new markets we do offer a free one-year membership to build reviews, but then switch to a paid model. And we focus [mostly] on services with a high cost of failure, like in health care and home improvement. For example, if I have my roof repaired but it's a bad job, it can leak and lead to a string of other problems. That's where consumers are willing to pay for high-quality [reviews]. And we don't allow anonymous reviews. We think people should be accountable for what they say online.

Q. How did you initially raise money from investors?

A. We raised about $50,000 from Bill's friends and they continued to support the business along the way. We raised money just as we needed it. But then people started to notice us, so we went through the process with three to four venture-capital firms and it went from there.

Q. What has been your toughest moment?

A. For me, personally, it happened about four months into the business. I covered the phone during the day and knocked on doors at night -- and I was only selling one membership a day. I remember calling Bill and we met at a coffee shop because I needed to talk. But as soon as I sat down I just started crying. He spent much of that hour giving me a pep talk. At the end, the only thing I was able to muster was, 'I'm not going to quit.'

Q. What words of wisdom did he share that day that stuck with you?

A. He reassured me this is not the way it will always be. I was so focused on how many times people said no, and he redirected me out of thinking about knocking on doors and back to thinking about where we could take the business.

Q. As a company co-founder at age 22, did you find people didn't take you seriously?

A. In the early days, the customers' image of me was very different than what I was. They thought I was in my mid-40s and a stay-at-home mom! But you just stick to what you came to do. If you're prepared and you know what you're talking about [in business], people will get over the age issue.

Q. What advice do you have for other young entrepreneurs?

A. Work at presenting yourself more maturely because it will help people take you more seriously. And don't get rattled by [skeptics], just because you're young. Let it roll off your shoulders and keep going.

Q. What's next for the company—will you sell it or go public?

A. We just finished up the latest round of financing, so we're very much focused on running the business. We do look at exit opportunities along the way. But right now, we're thinking about how to grow and we're still having a lot of fun with that.

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